2026-01-29 08:33:48
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Tesla is officially retiring its history to clear space for its future.
On the Q4 earnings call, Elon Musk gave the Model S and X an “honorable discharge,” announcing that production of the flagship vehicles that built the brand will end next quarter. Their Fremont assembly lines will be converted into a massive production hub for the humanoid robot Optimus, with a target of 1 million units per year.
The numbers explain the urgency. Tesla delivered 418K vehicles in Q4, a sharp 16% decline from Q3 as we expected in our previous write-up. For the first time in its history as a public company, Tesla reported a full-year revenue decline, with 2025 revenue falling 3% to ~$95 billion.
Today’s auto business is cooling just as tomorrow’s initiatives need to heat up. Tesla officially leaned into this transition by announcing a $2 billion investment in xAI, further blurring the lines between manufacturing and the broader Musk AI ecosystem.
Declining market share and early signs of brand erosion have yet to show up in the stock. Instead, investor attention remains firmly anchored on autonomy and robots.
That focus makes sense once you consider Tesla’s $1.5 trillion valuation.
The core auto business supports a ~$0.4 trillion valuation, based on roughly 20× EBITDA applied to Tesla’s 2022 peak profitability.
The remaining $1.1 trillion is where expectations do the heavy lifting. While the precise breakdown is fluid, the market is effectively underwriting three buckets:
Autonomy/FSD ~$0.6 trillion.
Humanoid robots (Optimus) ~$0.3 trillion.
Energy, services, and other segments ~$0.3 trillion.
In other words, over two-thirds of Tesla’s valuation rests on businesses that are early, unproven at scale, or not yet meaningful revenue drivers.
The Q4 update is therefore less about deliveries today and more about promises that justify the valuation tomorrow. As manufacturing growth stalls, the burden of proof shifts entirely to the software and robotics timelines.
Today at a glance:
Tesla Q4 FY25.
Robotaxi promises.
Earnings call key quotes.
What to expect for Optimus.
2026-01-24 23:02:33
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💊 J&J: Catapulting Growth
🧴 P&G: The Softest Quarter
🧬 Abbott: Growing Pains
🦾 Intuitive Surgical: da Vinci 5 Liftoff
🏦 Schwab: Asset Gathering Machine
🛩️ United Airlines: Cleared for Takeoff
Johnson & Johnson’s Q4 revenue rose 9% Y/Y to $24.6 billion ($440 million beat) and adjusted EPS came in at $2.46 (in-line). The results validated management’s declaration of 2025 as a “catapult year,” as robust performance in Innovative Medicine (+10%) and MedTech (+7%) helped the company successfully bridge its patent cliff.
The pharmaceutical portfolio executed a critical pivot. Soaring sales of Tremfya (+68%) and the oncology powerhouse Darzalex (+27%) more than offset a steep 48% decline in Stelara revenue caused by biosimilar competition.
In MedTech, the cardiovascular segment remained a standout, with Shockwave (+23%) and Abiomed (+20%) proving the value of recent high-profile acquisitions.
Looking ahead, J&J issued bullish FY26 guidance, projecting revenue to break the $100 billion barrier for the first time (midpoint $100.5 billion). Despite facing ~$500 million in expected tariff costs, a new drug pricing deal with the White House, and renewed volatility in talc litigation, management remains confident. J&J is targeting double-digit growth by the end of the decade as it finalizes the separation of its orthopedics business.
P&G hit a speed bump in Q2 FY26, reporting revenue growth of 1% Y/Y to $22.21 billion ($80 million miss) and core EPS of $1.88 ($0.02 beat). Organic sales growth stalled to flat (0%), as a 1% price increase was fully negated by a 1% decline in volume. This marks the slowest organic growth pace in a decade, driven largely by a 2% decline in the critical North American market.
Management attributed the volume weakness to tough year-over-year comparisons (consumers hoarded essentials last year ahead of port strikes) and temporary headwinds like the government shutdown. While the Family Care segment struggled (-3%), the International business remained a bright spot, with strong growth in Latin America (+8%) and Europe (+6%).
Despite the sluggish top-line, CFO Andre Schulten declared that P&G has “completed what we fully expect will be the softest quarter of the year.” The company maintained its full-year guidance for organic sales (0% to +4%) and Core EPS growth, betting on a second-half rebound driven by new product innovations and stabilizing US demand.
2026-01-23 21:03:29
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If you have followed headlines to start 2026, you have likely noticed what investors and operators are calling the Great SaaS Meltdown, or more dramatically, the SaaSpocalypse.
What initially seemed like a short-term selloff is starting to look more durable. The market is reassessing how enterprise software should be valued in an AI-driven world.
While software searches for a floor, the hardware layer is seeing historic investment. Yesterday, we got a fresh look at whether Intel is finally capturing its share of that spend and how its turnaround is progressing.
Today at a glance:
☁️ The Great SaaS Repricing
🏭 Intel’s Supply Squeeze
As AI agents and new autonomous tools gain traction, enterprise software stocks have materially underperformed. The WisdomTree Cloud Computing Fund, a diversified basket of SaaS companies, is down nearly 10% over the past month, while the broader market has been mostly flat.
Zooming out sharpens the contrast. Since the release of ChatGPT in late 2022, the Nasdaq 100 has more than doubled. Software stocks, by comparison, are up just 19% over the same period (see chart).
Valuations reinforce the message. Enterprise software multiples have compressed to near-historical lows, whether measured by revenue or earnings multiples.
Investors are increasingly questioning whether the traditional SaaS growth model still deserves the premium it once commanded.
So what changed?
It would be comforting to blame this entirely on AI or interest rates. But Jared Sleeper at Avenir Analysis points to a simpler, more uncomfortable truth: SaaS has passed the middle of its S-Curve.
The sector is maturing, and growth is getting structurally harder to find.
Sleeper’s data highlights a collapse in sales efficiency that predates the agentic panic. Between 2021 and 2024, the public software companies in his analysis increased their sales & marketing spend while generating less incremental revenue.
The era of “hire more sales reps to grow faster” was arguably over before agents even showed up. AI just accelerated the reckoning.
Meanwhile, most public software companies still rely heavily on stock-based compensation, with Avenir’s data showing a median of 16% of revenue, artificially inflating free cash flow margins and diluting shareholders.
On January 12, Anthropic released Claude Cowork, a tool that can autonomously build spreadsheets, browse the web, draft reports, and organize files. While Claude Code was a breakthrough for developers, Claude Cowork serves everyone else.
Anthropic reportedly built the tool in less than two weeks using its own AI. Claude Cowork served as a signal rather than a cause. It surfaced a fear that had already been building for years.
If a small team can assemble enterprise-grade workflows in days using AI agents, the moat around many legacy SaaS products looks thinner. Investors are beginning to view large portions of enterprise software as replaceable, especially products that solve narrow problems without deep integration.
For more than a decade, SaaS valuations relied on a simple assumption. As customers hired more employees, they purchased more software seats. Revenue scaled with headcount.
Agentic AI weakens that relationship.
We are moving toward a world where outcomes scale without adding humans. If an AI agent can perform the work of an entire marketing team, the buyer is no longer focused on the number of licenses. The focus shifts to the result delivered.
That shift challenges the core SaaS value proposition:
SaaS model: Software creates value by organizing human labor through tools like CRM and project management.
Agentic model: Software creates value by executing the work itself.
As buyers evaluate return on investment based on outputs rather than seats, per-user pricing becomes harder to justify. This helps explain why companies like Salesforce, Intuit, and Adobe have experienced sharp selloffs. Revenue that once appeared predictable now carries more long-term uncertainty.
Pricing pressure is only part of the challenge. The other part is structural.
Altimeter’s Jamin Ball describes this shift as the rise of the platform of platforms, a change in where coordination and execution actually occur.
In the past, humans acted as the connective tissue. They checked Salesforce for pipeline data, opened NetSuite to review budgets, and sent emails to move work forward. Software lived in silos, and people supplied the logic between them.
Now, agents increasingly fill that role.
AI agents can pull data from one system, update another, and trigger actions across multiple tools without human intervention.
This creates a serious challenge for traditional systems of record. Products like Salesforce or Workday remain strong within their domains, but they are structurally constrained by their silos. A CRM cannot easily orchestrate workflows across ERP, HR, and finance.
Agents operate above the stack and execute the workflow.
As value shifts upward, underlying SaaS products risk becoming commoditized storage layers. Satya Nadella has warned that legacy software could be reduced to basic CRUD databases (Create, Read, Update, Delete) that store information while agents capture user attention and economic value.
Software remains essential, but the definition of investable software has changed. Market conviction has concentrated in three areas positioned for an agent-driven future:
Security & Identity: As AI agents proliferate, verification becomes critical. Enterprises must know who (or what) is accessing data. Names like CrowdStrike and Palo Alto Networks have held up relatively well.
Platforms: Systems where work is routed, audited, and executed. These act as operating layers that agents depend on rather than bypass. The market hasn’t yet separated these from simpler apps, explaining why stocks like Atlassian have sold off in sympathy.
Data Gravity: Businesses that control proprietary data loops that AI needs to function (including Palantir, Snowflake, Databricks).
The most exposed layer is the wrapper. These applications primarily provide an interface on top of a database. When an agent can query the data directly, the interface loses its value.
For some, this is a lasting repricing. For others, it is an opportunity to embed agents deeply and monetize outcomes instead of seats.
Software businesses must demonstrate that revenue can grow even as customer headcount remains flat. Until that evidence appears, multiples will stay compressed.
Ultimately, software businesses face a binary choice:
Financialize (cut costs to protect returns).
Embrace AI (cannibalize their own revenue with a new business model and likely lower margins).
Most management teams will try to do both. The winners will be the ones brave enough to choose the latter.
Intel’s Q4 revenue dipped nearly 4% Y/Y to $13.7 billion ($310 million beat), while non-GAAP EPS came in at $0.15, surpassing the $0.08 consensus estimate despite the company swinging to a GAAP net loss of $333 million.
Client Computing ($8.2 billion) missed estimates as inventory dried up.
Data Center & AI ($4.7 billion) outperformed expectations, growing 9% Y/Y, driven by surging demand for AI compute.
Foundry revenue rose 4% Y/Y to $4.5 billion, with the custom ASIC business notably accelerating to an annualized run rate of more than $1 billion.
CEO Lip-Bu Tan stressed that the turnaround is a “multiyear journey” but celebrated a key milestone: the shipment of Panther Lake CPUs on the proprietary 18A process. The balance sheet remains a fortress, ending the year with $37 billion in cash and investments, bolstered further by a strategic $5 billion investment from NVIDIA.
However, the outlook weighed heavily on sentiment with the stock collapsing more than 10% in after-hours trading. Intel guided Q1 FY26 revenue to ~$12.2 billion (missing the $12.6 billion consensus) and expects break-even non-GAAP EPS.
Management warned that acute supply shortages and manufacturing yield challenges will peak in Q1 2026 before easing in the spring. These constraints are forcing a prioritization of server wafers over PC chips, which is expected to compress gross margins to ~34.5%.
Check out the earnings call transcript on Fiscal.ai here.
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I own ADBE, CRM, CRWD, INTU, MDB, NOW, PANW, PLTR, SHOP, SNOW, and TEAM in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Partner disclosure: Energy Exploration Technologies, Inc. (“EnergyX”) has engaged App Economy Insights to publish this communication in connection with EnergyX’s ongoing Regulation A offering. App Economy Insights has been paid in cash and may receive additional compensation. App Economy Insights and/or its affiliates do not currently hold securities of EnergyX.
This compensation and any current or future ownership interest could create a conflict of interest. Please consider this disclosure alongside EnergyX’s offering materials. EnergyX’s Regulation A offering has been qualified by the SEC. Offers and sales may be made only by means of the qualified offering circular. Before investing, carefully review the offering circular, including the risk factors. The offering circular is available at invest.energyx.com/.
2026-01-21 07:52:53
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Netflix shares are trading 37% off their June 2025 peak. That’s the largest downturn for the stock since its 75% collapse in 2022.
But the drivers are very different. In 2022, investors fled due to slower growth post-COVID. Today, the sell-off is a two-part drama:
Profitability scare: Netflix shares stumbled after a Q3 earnings miss, driven by unexpected margin compression and a messy ~$600 million tax dispute in Brazil.
Merger shock: That caution turned into a full-blown exit in December. The pending $83 billion Warner Bros. acquisition introduced complexity, a massive debt load, and integration risks.
All eyes are on the ongoing drama surrounding the merger, with a hostile takeover from Paramount/Skydance and new moving pieces (more on this in a minute).
Today at a glance:
Netflix Q4 FY25.
Warner Drama Update.
Key Earnings Call Quotes.
Ben Affleck vs. The Bitter Lesson.
Revenue +18% Y/Y to $12.1 billion ($80 million beat).
Operating margin 25% (+2pp Y/Y).
EPS $0.56 ($0.01 beat).
Operating cash flow: $10.1 billion (22% margin).
Free cash flow: $9.5 billion (21% margin).
Cash and short-term investments: $9.1 billion.
Debt: $14.5 billion.
Revenue +12%-14% to ~$51.2 billion ($0.2 billion beat).
Operating margin 31.5% (+2pp Y/Y).
📈 Growth accelerates: Revenue growth re-accelerated to +18%, fueled by the ad tier. After stopping regular subscriber updates in 2025, Netflix revealed a new milestone of 325 million paid memberships (representing 8% subscriber growth) and now serves an audience approaching 1 billion people globally.
📢 Ads scale up: The ad business is becoming material, with revenue growing 2.5x Y/Y to $1.5 billion in FY25 (3% of overall revenue). Management noted the ad-supported plan now accounts for over 50% of new sign-ups in available markets, validating the multi-tier strategy. Management expects ad sales to double to ~$3 billion in 2026.
⚠️ Engagement slowing: This is the bearish signal. Despite a massive $18 billion content spend in 2025 (up 11% Y/Y), engagement grew only ~2% in the second half. Management plans to hike spending by another 10% in 2026.
📊 Margins follow seasonality: Operating margin landed at 25%, down sequentially from Q3 (28%) but up +2pp year-over-year. The sequential dip was expected, reflecting the heavy Q4 content slate and marketing push during the holidays. The year-over-year expansion demonstrates continued operating leverage, validating that the margin compression in Q3 was indeed a one-off.
🌍 Sony Pictures deal: A new global exclusive partnership grants Netflix first-window streaming rights for major theatrical releases, including The Legend of Zelda and the Spider-Verse finale, through 2029. Netflix wants to be the inevitable home for Hollywood’s biggest hits immediately after they leave theaters.
🔮 FY26 guidance is noisy: Revenue is expected to rise ~13% Y/Y, with margins expanding, and FCF growing ~16% Y/Y to $11 billion. That said, some costs will be front-loaded, and the Q1 EPS guide fell short of estimates, adding near-term pressure. The focus now shifts to integration, execution, and regulatory approval for the mega-merger.
🏦 Leverage focus: To fund the Warner Bros. deal, Netflix secured $42.2 billion in bridge financing. While the balance sheet currently shows $14.5 billion in debt, this load will increase significantly. Share buybacks are paused indefinitely to hoard cash for the purchase. All eyes will be on the deleveraging path and synergies expected.
In our deep dive in December, we analyzed Netflix’s proposed merger with Warner Bros. We warned then that it was far from a done deal. Six weeks later, the mega M&A move has turned into a trench war on three fronts.
Here’s the state of play as of today and what to make of it.
2026-01-17 23:01:36
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🏛️ Goldman Sachs: Trading Desk Roars
👔 Morgan Stanley: Integrated Machine
📈 Blackrock: Breaking $14 Trillion AUM
🛩️ Delta Airlines: Navigating Headwinds
🍺 Constellation Brands: Relief Rally
🌿 Tilray: International Surge
Goldman Sachs delivered a noisy but ultimately bullish quarter. Revenue fell 3% Y/Y to $13.5 billion ($400 million miss), largely due to a $2.3 billion markdown tied to the Apple Card portfolio exit we discussed here. This caused the revenue from the Platform Solutions segment to turn negative in Q4.
However, the bottom line told a different story. GAAP EPS of $14.01 crushed expectations ($2.25 beat), aided by a massive credit reserve release that more than offset the revenue hit.
Under the hood, the core franchise is firing on all cylinders. Equities trading revenue (included in the Global Banking & Markets segment) rose 25% Y/Y to $4.3 billion, cementing Goldman’s dominance in volatile markets. Investment Banking fees also climbed 25% Y/Y to $2.6 billion, driven by a resurgence in advisory and debt underwriting. The firm is successfully pivoting back to its Wall Street roots, with the Global Banking & Markets division posting record full-year revenues of $41.5 billion.
CEO David Solomon signaled that the strategic “narrowing” is complete, raising the quarterly dividend to $4.50 and unveiling ambitious new targets for the Asset & Wealth Management unit (aiming for a 30% pre-tax margin). With the consumer lending distraction largely resolved and an M&A backlog at a four-year high, Goldman is effectively clearing the decks to ride the wave of a potential 2026 IPO and dealmaking boom.
Morgan Stanley capped off a record year with Q4 revenue rising 10% Y/Y to $17.9 billion ($140 million beat) and GAAP EPS of $2.68 ($0.26 beat).
The results demonstrated significant operating leverage, with the firm delivering a robust Return on Tangible Common Equity (ROTCE) of 21.8% and an improved efficiency ratio of 68%.
2026-01-16 21:02:07
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If the AI era is an arms race, TSMC is the arsenal builder everyone depends on. It has now become the 6th most valuable company in the world, right behind Amazon.
In Q3, the narrative was about conviction. In Q4, that conviction translated into the largest capital expenditure plan in the company's history: $52 billion to $56 billion for 2026 (up 30% year-over-year).
When asked if the demand is real, CEO C.C. Wei highlighted the stakes:
“If we don’t do it carefully, that’d be a big disaster.”
You don’t spend $56 billion on a hunch. A misstep here would result in empty factories and massive losses. By pulling the trigger, management signals they have clear visibility. They are building because the orders are already there.
With 2nm production online and gross margins hitting new highs, the foundry is cementing its lead with hard assets.
Disclosure: I own TSM in App Economy Portfolio. It was the January 2023 Stock Idea, and the stock has more than quadrupled since then.
Today at a glance:
⚙️ TSMC’s $56 billion bet
📱 Apple picks Gemini for Siri
🤖 Zuck launches Meta Compute
Income statement:
Revenue rose +25% Y/Y to $33.7 billion ($1.0 billion beat).
Gross margin was 62% (+3pp Y/Y).
Operating margin was 54% (+5pp Y/Y).
EPADR (American Depositary Receipt) was $3.14 ($0.16 beat).
Revenue by platform:
💻 High-Performance Computing (55% of revenue, +2pp Y/Y).
📱 Smartphone (32% of revenue, -3pp Y/Y).
💡 IoT (5% of revenue, flat Y/Y).
🚘 Automotive (5% of revenue, +1pp Y/Y).
🎮 Digital Consumer Electronics (1% of revenue, flat Y/Y).
Others (2% of revenue, flat Y/Y).
Revenue by technology:
3nm (28% of revenue, +2pp Y/Y).
5nm (35% of revenue, +1pp Y/Y).
7nm (14% of revenue, flat Y/Y).
16nm and above (23% of revenue, -3pp Y/Y).
Cash flow:
Operating cash flow margin was 69% (-2pp Y/Y).
Free cash flow margin was 35% (+5pp Y/Y).
Balance sheet:
Cash, cash equivalents, and short-term investments: $97.6 billion.
Long-term debt: $27.2 billion.
Q1 FY26 Guidance:
Revenue ~$35.2 billion ($2.7 billion beat).
Gross margin ~64% (~60% expected).
Operating margin ~55% (~51% expected).
💥 Another double beat: The top-line beat was driven by “insane” AI demand. But the real story is profitability. Gross margin expanded to 62% (up from 60% last quarter), underscoring TSMC’s significant pricing power as customers compete for limited capacity.
🔮 Guidance implies acceleration: Management isn’t seeing a slowdown. For Q1 2026, they expect revenue between $34.6 and $35.8 billion. That’s a massive 38% year-over-year increase at the midpoint. For full-year 2026, they expect revenue to grow by nearly 30% (in USD), significantly outpacing the broader industry forecast of 14%.
🏗️ The $56 billion bet: TSMC raised its 2026 capex budget to $52–$56 billion (up from $41 billion in 2025). About 80% of this is allocated to advanced process technologies. This aggressive spending signals that their customer checks for AI demand over the next 2-3 years are rock solid.
⚙️ The 2nm era begins: While 3nm and 5nm are the current cash cows (combined 63% of revenue), TSMC confirmed that N2 (2nm) entered high-volume manufacturing in Q4 2025 with good yields. They expect a fast ramp in 2026, maintaining their lock on technology leadership against competitors like Intel and Samsung.
🤖 HPC is now the dominant force: High-Performance Computing (AI + 5G) now represents 55% of total revenue, widening the gap with Smartphones (32%). While consumer electronics face headwinds from a memory chip supply crunch, TSMC notes that high-end AI smartphones remain resilient.
🇺🇸 Doubling down on Arizona: The Gigafab plan is expanding. TSMC confirmed the purchase of a second large parcel of land in Arizona to support an independent gigafab cluster. Fab 1 is in high-volume production, and Fab 2 is pulled forward to 2027.
🗣️ The bubble verdict: Addressing fears of overspending, CEO C.C. Wei noted that the capex hike comes after rigorous verification with customers. He stated the silicon supply remains the bottleneck for AI infrastructure, not power, and that the company is working to “close the gap” between supply and demand.
Check out the earnings call transcript on Fiscal.ai here.
Apple has officially selected Google’s Gemini to power the next generation of Siri.
This is a multi-year partnership in which Google’s models and cloud infrastructure will serve as the foundation for Apple’s AI features. Unlike the existing integration with OpenAI (which acts like a “phone a friend” chatbot when Siri is stumped), this deal puts Gemini deep inside Siri’s operating logic.
For over a decade, the money has flowed one way: Google pays Apple (an estimated $20+ billion annually) to be the default search engine on the iPhone.
This deal flips the script, albeit on a smaller scale. Reports suggest Apple will pay Google ~$1 billion per year. For a company like Apple, $1 billion is a rounding error. But it signals a massive strategic pivot. Apple has effectively decided that spending tens of billions on CapEx to train a frontier model from scratch isn’t the best use of its cash.
This is a classic “buy vs. build” decision. By white-labeling Gemini:
Apple (the aggregator): Keeps the direct relationship with the user and the privacy layer (Private Cloud Compute). They capture the value of the interface.
Google (the supplier): Gets massive validation and scale for its models but operates in the background.
You likely won’t see the Gemini logo when you use Siri. Apple is treating Google’s model like a component supplier, similar to how it buys screens from Samsung or camera sensors from Sony. It’s Apple Intelligence on the outside, powered by Google on the inside.
Apple is betting that it doesn’t need to have the smartest model in the world at any given time. It just needs one that is reliable.
Risk: Apple is now dependent on a rival for a core AI competency.
Reward: Siri will finally become usable for complex tasks without Apple torching its margins on training frontier models.
Reports from the Financial Times suggest OpenAI declined the deal. Sam Altman reportedly refused to become a white-label utility, prioritizing compute for OpenAI’s own future hardware with Jony Ive. This leaves Google to serve as Apple’s invisible backend.
🔮 What to watch Google recently surpassed Apple in market cap for the first time since 2019. With this deal, Google secures its place as the AI utility layer for the world’s most premium hardware. The frenemies remain closer than ever.
While Apple is outsourcing its AI brain to Google to stay asset-light, Meta is going asset-heavy on a scale that is hard to comprehend.
Meta has established Meta Compute, a new top-level division dedicated to building the physical backbone of the AI era.
Zuckerberg is splitting his infrastructure strategy into two clear lanes:
Technical (now): Led by Santosh Janardhan, focusing on the actual data center architecture, silicon, and day-to-day operations of the fleet.
Supply Chain (future): Led by Daniel Gross (who co-founded Safe Superintelligence with Ilya Sutskever), focusing on securing the supply chain and business models needed to build at this scale.
Crucially, Meta is not trying to become AWS. Zuck isn’t building these data centers to rent servers to startups (a low-margin game where AWS, Azure, and GCP already won).
Zuck might have PTSD from Apple's App Tracking Transparency, which nearly derailed his business. He is looking far ahead to ensure history doesn’t repeat itself.
Meta is betting that compute (not models) will be the scarce resource of the next decade. By owning the power plants and the silicon, Meta ensures it never has to beg Google or Microsoft for capacity to run its Personal Superintelligence features.
Wall Street generally hates it when Zuckerberg spends billions on sci-fi projects. To buy their patience for this new AI splurge, he had to offer a sacrifice.
Meta is cutting ~10% of Reality Labs (the Metaverse division) and closing studios like Twisted Pixel and Sanzaru.
This is the official pivot from Metaverse to AI. The dream of living in VR isn’t dead, but it is being deprioritized to fund the Gigawatt buildout.
Meta has a critical advantage over OpenAI because the ad business already generates massive free cash flow. By refocusing his effort on AI, Zuck can afford to burn billions on GPU clusters while his core business pays the bills.
You will hear this term a lot. Zuckerberg stated Meta plans to build “tens of gigawatts” of capacity this decade.
What is a Gigawatt (GW), you ask? It’s roughly the output of a standard nuclear power plant. That’s enough energy to power ~750,000 homes.
Meta is effectively trying to build the equivalent of 10 to 50 nuclear power plants’ worth of compute capacity.
To execute this, Zuckerberg just hired Dina Powell McCormick as President and Vice Chair. She was previously a partner at Goldman Sachs and a Trump Deputy National Security Advisor.
Why? Because you don’t build all this nuclear power by writing code. You do it by navigating complex government regulations and sovereign wealth deals. She is the political bridge to the physical power Meta needs.
Meta also announced huge deals with three nuclear energy providers this week: Vistra, TerraPower (Bill Gates-backed), and Oklo (Sam Altman-backed). The goal is to add 6.6 GW of nuclear capacity by 2035.
This is a race against physics and regulation. By hiring a Trump-era diplomat, Zuck wants to ensure the regulatory environment is favorable to this massive buildout.
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I own AAPL, AMZN, GOOG, META, NVDA, and TSM in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.